We’ve known for many years that maintaining systems of record – traditional legacy applications that need to be patched, upgraded, and otherwise nurtured to “keep the lights on” – gobbles up 70% to 80% of the IT budget, according to Forbes and many others. This leaves us with as little as 20% of IT budgets to invest in innovation, the area where competitive advantage and new business value are created.
Much has been written about this issue and its stagnating effect on innovation and agility: The urgency to find a solution has never been greater. Business realities are driving this urgency: the ever-changing needs of businesses and customers, a dynamic regulatory situation, new business opportunities, and, of course, agile competitors.
Gartner sums up the crucial need for a quick response:
“Organizations must establish a new strategy for business applications that responds to the desire of the business to use technology to establish sustainable differentiation and drive innovative new processes …”
IT strategies to refocus on innovation
So, how do you achieve that IT agility and innovation in the face of business and data silos, legacy systems, outdated software, and changing technologies? Back in 2012, Gartner attempted to find an answer using their PACE-Layered Application strategy and defined three different “layers” of IT systems that must be supported:
- Systems of Innovation – experimentation using hot new technologies to quickly build and test out creative new solutions that add business value.
- Systems of Differentiation – out-of-the-box apps, like CRM, that can be configured by each competitor’s IT organization in ways that give them some competitive advantage in their market.
- Systems of Record – necessary legacy software systems like accounting and human resources that provide no competitive advantage.
More recently, Gartner introduced a newer strategy they call Bimodal IT, which, according to Gartner, is about managing two separate modes of IT delivery, one focused on stability and the other on agility. The newer Bimodal IT model transforms the three systems into two modes:
- Stability mode – industrial IT with a cost center that’s cost-efficient
- Agility mode – strategic IT that drives top-line revenue growth
What has happened here is that Gartner has simplified the IT strategy by compressing the top two layers (Systems of Innovation and Differentiation) into Mode 2 – Agility mode, and left the legacy Systems of Record alone and called it Mode1 – Stability mode.
Gartner expresses it like this:
“Treating Strategic IT the same way as Industrial IT will result in lost opportunities, poor customer experiences, and a reputation for being slow to market – a sure way to lose the next generation of both customers and employees.”
Building Systems of Innovation
Fortunately, there’s an alternative to that unsettling prospect: a way to safely and quickly build Systems of Innovation to take advantage of new business opportunities. Our customers achieve this agility with Pega 7 in a variety of ways, and these generally take one of three forms, each with its own level of investment and potential added business value. Together we can think of these three levels as a maturity model for systems of innovation.
A Maturity Model for Systems of Innovation
Each of the three levels above corresponds to specific strengths of the Pega 7 platform. These strengths are also part of the strategic apps we’ve built on top of Pega 7.
At level 1, you’re focusing on modernizing the User Interface of your legacy apps. Pega customers can quickly accomplish this by adding Pega as an innovation layer on top of legacy apps to provide a single, consistent responsive UI across all browsers and devices, including mobile phones and tablets. This can have a substantial business value in and of itself.
At level 2 in this model, you are adding substantial capabilities to your legacy apps by taking advantage of the power of Case Management, BPM and Virtualized Data Modeling, for example, as well as the fast development and delivery cycles made possible with Pega 7. At level 2, you have the ability to fully support agile business initiatives with enterprise-scale apps.
Finally, at level 3, you start to make even more impact. You can do this with focused experimentation that can lead to such valuable innovations that they can completely disrupt your market. For this, you’ll need the most advanced technologies in areas like analytics, decisioning, and intelligent automation.
Hear How Cisco is Building Systems of Innovation
Because this level 3 can deliver such great business value, I organized a session at the recent Pegaworld entitled "Implementing a System of Innovation" in which the audience hears directly from Santosh Krishnakumar, IT Architect at Cisco Systems about how Cisco is experimenting with innovative applications of the advanced analytics and decisioning capabilities of the Pega Decision Hub to add value to their World Class Support initiative. It’s worthwhile to watch the entire recorded session!
Inside the Pega Decision Hub
The Pega Decision Hub, which we call the “the always-on brain,” takes your company historical data from the best sources, blends it with real-time streaming data, and uses it to glean insights from patterns or anomalies in the data, identify opportunities and predict problems, and then make recommendations or automated decisions. The Decision Hub is an integral part of the Pega 7 platform’s world-class Case Management and BPM capabilities, so these recommendations and automated decisions happen in the context of larger workflows, and lead to complex orchestrated actions being executed across the enterprise.